Bank Audit Check List & Procedure (Concurrent Audit)

Concurrent audit means doing the examination of the financial transactions at the time of happening or parallel with the transaction. It is part of a bank’s early warning system to ensure timely detection of irregularities and lapses. It helps in preventing fraudulent transactions at branches. here the check list and procedure, I hope you will find this information helpful

Index:-

√ Savings Account opening forms (SB)

√ Current account opening forms (CA)

√ Deposits opening forms

• Fixed Deposits (FD)
• Recurring Deposits (RD)
• Other Deposits

√ Loans:

• Home Loans
• Personal Loans
• Pension Loans (Same as Personal Loan)
• Vehicle Loans
• Educational Loans
• Gold Loans
• Loan on Deposits/Term Loan
• Mortgage Loans (Same as Home Loan)
• Cash Credit
• Over Draft
• Secured Over Draft

√ TDS & GST (Check Timely filed or not)

√ Vouchers

√ Forex

√ Gold loan Verification

√ Cash Verification

√ Locker summary

√ Income Leakage

Savings Account opening forms:

1. Check application duly filled or not

2. Application Signed by the manager or officer

3. Proofs Should be verified with originals by the Manager or Officer

4. Address in application should be as in address proof submitted with the application

5. Account number, Customer ID and account opening date is entered in application or not

6. Check PAN or Form 60 have been taken or not ‘

7. Check in CBS with account number PAN or Form 60 is entered or not and signature and photo is scanned in CBS

Current account opening forms:

1. If current account opened in the name of individual the procedure is same as SB but PAN must be taken here

2. If current account opened in the name of business or firm or any other body by individual the procedure is same as SB but here PAN of individual and business or firm of any other body proof should be taken EX: PAN, GST, Firm registration

3. If current account opened in the name of business or firm or any other body by partners the procedure is same as SB but here PAN and Address proofs of the all partners also taken and all partners agreed for one managing partner in their letter head, and business or firm of any other body proof should be taken EX: PAN, GST, Firm registration

Deposits:

1. Check whether application is duly filled

2. Check whether Customer ID, account number and date of deposit should be in application

3. Interest rate amount of deposit is same as in CBS and application

4. Interest rate should be applicable as per bank circular

5. If the Customer is already done KYC with the bank, then no need to take again KYC again.

6. If the Customer is new, then KYC should be in record

Loans:

Home Loans:

Verify the below mentioned documents are submitted by the borrower at the time of taking loan from bank

1. Borrower & Guarantors’ profile with Photographs, ID & Address proof copy.

2. PAN Card copy of borrower & guarantors.

3. CIBIL of borrower & guarantors.

4. Documents should be self-attested & verified with original.

5. 3 years ITR of borrower & guarantors.

6. Salary slips of borrower & guarantors.

7. Bank pass sheet for the last 6 months are obtained and verified.

8. Legal opinion (as the case)

9. Property Valuation Report (not more than 3 years old)

10. Creation of EM (Equitable Mortgage)

11. CERSAI

12. Pre sanction & Post sanction Inspection report

13. Approval of the name of the builder from circle head is available in case of purchase of house/flat from a builder.

14. Insurance policy of building with bank clause.

15. Appropriate ROI & Proper margin is stipulated.

16. DPN (Demand Promissory note)

17. Check whether the following charges are duly collected or not

Processing charges

Documentation charges

Inspection charges

Mortgage charges

In case of building under construction:

21 .Limit will be disbursed stage by stage.

22. Photo of the building / flat under construction are obtained at each stage of construction and countersigned by branch official who has visited the site with DATE & SEAL.

23. The site inspection is done on a rotation basis by the branch officials at each stage of construction.

24. The work completion certificate issued by the builder is countersigned by the architect at each stage of disbursement.

25. Bills/vouchers (in detail) are submitted at the time of each disbursement.

26. Valuation report to be obtained after completion of construction.

27. Building will be insured after completion.

28. Check repayment schedule. Repayment should be start after 12/15/18 months. As the case may be.

Financial Documents:

For Salaried Individual: 3 month salary slip, Form 16 and bank statement

For Self-Employed Individual: IT returns for last 2 years along with computation of income tax for past 2 years certified by a Chartered accountant

For Self-Employed Non- Professionals: IT returns for last 3 years along with computation of income tax for past 2 years certified by a Chartered accountant

Personal Loans:

Verify the below mentioned documents are submitted by the borrower at the time of taking loan from bank

1. Borrower & Guarantors’ profile with Photographs, ID & Address proof copy.

2. PAN Card copy of borrower & guarantors.

3. CIBIL of borrower & guarantors.

4. Documents should be self-attested & verified with original.

5. 3 years ITR of borrower & guarantors.

6. Salary slips of borrower & guarantor.

7. Bank pass sheet for the last 6 months are obtained and verified.

Salaried Individuals: Latest 3 month’s Salary Slips and Form 16, Bank Statements of 6 months

Self Employed Individuals: Latest 1 year bank statement for both savings and current account

8. Check whether the following charges are duly collected or not

Processing charges

Documentation charges

Inspection charges

Vehicle Loans:

Verify the below mentioned documents are submitted by the borrower at the time of taking loan from bank

1. Borrower & Guarantors’ profile with Photographs, ID & Address proof copy.

2. PAN Card copy of borrower & guarantor.

3. CIBIL of borrower & guarantor.

4. Documents should be self-attested & verified with original.

5. 3 years ITR of borrower & guarantor.

6. Salary slips of borrower & guarantor.

7. Original Invoices.

8. Copy of RC

9. Insurance policy of vehicle with bank clause.

10. Hypothecation agreement.

11. DPN

12. Vehicle should be inspected once in 12 month.

13. Check processing charges are taken.

14. Appropriate ROI has been stipulated.

15. In case of second hand vehicles, valuation certificate from reputed automobile industry.

14. Check whether the following charges are duly collected or not

Processing charges

Documentation charges

Inspection charges

Mortgage charges

Educational Loans:

Verify the below mentioned documents are submitted by the borrower at the time of taking loan from bank

1. Loans are granted to borrowers residing NEAR THE BRANCH.

2. Guardian/parents’ profile with Photographs, ID & Address proof.

3. Copy of mark sheets & certificates of the student.

4. Documents should be self-attested& verified with original.

5. CIBIL of guardian/parents.

6. Students pursuing their studies in affiliated universities/colleges ONLY.

7. Prospectus & Fee details.

8. Loan quantum is restricted to 10 % of the total tuition fee of the entire course.

9. If the student is a minor, the loan is to be granted only to the parent/guardian and undertaking letter obtained from the minor on attaining majority?

10. Yearly progress reports/ course completion certificate/ employment details are obtained.

11. Check whether the following charges are duly collected or not

Processing charges

Documentation charges

Inspection charges

Loan on Deposits/Term Loan:

1. Check whether Application duly filled by the borrower

2. Deposit bond or Passbook should be surrender to the bank by the customer who are taking loan from bank.

3. Checking of Lien Marking in CBS

4. Interest Rate should be greater than the deposit interest as per bank norms

Cash Credit:

Verify the below mentioned documents are submitted by the borrower at the time of taking loan from bank

1. Sanction letter.

2. Borrower & Guarantors’ profile with Photographs, ID & Address proof copy.

3. PAN Card copy of borrower & guarantors.

4. CIBIL of borrower & guarantors.

5. Documents should be self-attested & verified with original.

6. 3 years ITR of borrower & guarantors.

7. Proprietorship letter/ Partnership deed/ MOA/AOA (as the case may be)

8. Financial Statements of the firm/business/company

9. Proper margin & Appropriate ROI is stipulated.

10. Pre-sanction inspection report.

11. Post-sanction inspection report.

12. Primary security details

13. Check that stock, creditors & book debts statements submitted by the borrower is in prescribed format.

14. Ensure that Debtors are classified age-wise & only below 90 days (in most cases) debtors are allowed for DP(Drawing Power) purpose.

15. Check that drawing power is calculated correctly.

16. CA certified debtors statements/QIS (Quarterly Information System) are obtained quarterly/half yearly (as the case)

17. Verify Stock, Creditors & Book Debts statements from financial statements.

18. Hypothecation agreement of stock

19. Ensure that stock/book debts statements are submitted timely by the borrower. Otherwise charge penal interest on daily o/s balance.

20. Collateral security details

21. Valuation Report (not more than 3 years old)

22. Legal Opinion

23. Search report (In Case of Company)

24. Creation of EM (Equitable Mortgage)

25. CERSAI of collateral securities

26. Check that primary security (stock) & collateral security (buildings etc) is adequately insured with bank clause.

27. Check that inspections are carried out at periodic intervals & inspection report is on record.

28. PPC, Documentation charges & Inspection charges.

29. Annual Review Charges are taken, even if review is due.

30. Extension of limit permitted is as per the guidelines.

31. Check that party is utilizing the limit. (Otherwise commitment charges)

32. Turnover in the account.

33. Position of stock audit. (If applicable)

34. If account is running overlimit for more than 90 days, ensure that account is treated as NPA.

35. If review due / stock statements not submitted by the borrower for more than 180 days, ensure that account is treated as NPA.

36. Other sanction terms as stated in sanction letter.

37. Check whether the following charges are duly collected or not

Processing charges

Documentation charges

Inspection charges

Mortgage charges

TDS & GST:

1. Verifying whether the deduction of tax at source (TDS) from interest income on Term Deposits is done as per laid down procedure. If not deducted, then verify whether Form 15H/15G received or not.

2. Verifying whether TDS has been deducted on salaries made by the bank

3. Verifying whether appropriate GST has been collected on concerned items correctly such as If branch is running in rented premises then GST has been paid on rent by the branch likewise….

4. Both TDS & GST challans has to be verified by the concerned person every month

Voucher:  

1. The auditor should see whether the voucher is on a printed form.

2. The auditor should see whether all vouchers are consecutively numbered.

3. The auditor should check date, name of the party to whom the voucher is issued, the name of the party issuing the voucher, and the amounts, etc.

4. The vouchers, which are inspected by the auditor, should be cancelled by a stamp so that it cannot be produced again

5. The auditor should pay special attention to those vouchers, which are in the personal name of one of the employees or manager of the bank.

6. In case of vouchers, which require detailed checking, the auditor should put special mark on them. He should check such vouchers carefully.

7. The auditor should see that a responsible senior officer of the concern passes every voucher correctly and the rubber stamps are affixed. He should also see whether the responsible official signs them.

8. The auditor should see whether the voucher must be stamped.

9. The auditor should not take the help of the employees of the concern while checking the vouchers

10. The auditor should also see that the figures and words of the amount in the vouchers are the same.

11. The vouchers for insurances, rates, and taxes, etc. should be checked by the auditor with reference to the period for which the payment has been made. In case of payments in advance, the auditor should see whether correct adjustments have been made.

12. The auditor should check whether the borrower is mentioning pan numbers on deposits which are >50,000/-.

13. The auditor should check whether the borrower has signed properly in the voucher at appropriate places and that signature has been crossed by the appropriate banker or not

14. The auditor should check whether daily vouchers have been updated in CBS or not.

Forex:

1. In forex, we look through the exchange rate change and their correct valuation in books.

2. Check whether any availability of foreign exchange with bank & check calculation of profit and loss in foreign exchange.

3. There are some RBI guidelines regarding foreign exchange and we have to see the adherence of same.

Gold Loans:

1. Gold loans are given to persons who secured gold with bank

2. Check whether processing charges are collected as per Percentage as decided by the concerned bank

3. Check whether gold appraiser has checked the gold or not?

4. Check whether rate per gram have been given correctly or not by the bank

5. Weighing of gold have been checked by the concerned auditor person on random basis to confirm whether the bank have been weighed correctly or not

6. Check whether appropriate stamp duty has been paid or not

7. Check whether all borrower details have been correctly filled in the appropriate gold loan document & whether borrower has signed in appropriate places or not & whether the borrower has given required proofs like aadhaar & PAN etc.

8. See whether appropriate gold loan ledger has been maintaining by the bank or not?

Cash Balance:

1. Every morning we have to check the cash balance of Cash Book of Bank in which all details regarding cash balances are written on daily basis which is authorized by manager and cashier.

2. Once in the month we have to do physical verification of cash in hand with bank and ATM (if any) surprisingly and if any discrepancy found shall be reported in the report.

Lockers:

1. See that locker register is maintaining properly or not

2. See that locker rent is collecting as per instructions of bank

3. If locker rent is not paid by the borrower then ask bank whether they are directly taken from savings account or if deposit has been made by borrower on locker then they are collecting FD interest as locker rent or not

4. See that locker rent is updating in CBS or not

5. If any overdues it should be noted and intimated to the bank.

6. Ensure that Number of visits to locker by the customer does not exceeded the prescribed visits, if exceeds check whether bank had collected prescribed charges.

7. See that locker rent is collecting as per locker size (i.e, Small, Medium & Large)

Income Leakage:

This is the most important and sensitive part of concurrent audit. In most of the banks there are some income leakage and we have to find out that.

Generally income leakage arises due to following reasons and we have to look that:

1. Undercharge of processing fee, upfront fee and other charges by the bank during disbursement of loans.

2. Wrong feeding of interest rates in the system.

3. Wrong calculation of profit in forex transaction etc.

To overcome these types of revenue loss of bank

As an auditor →

Go through the calculation and genuineness of the different charges. .

We have to generate various MIS reports from the system and analyze them.

If bank undercharges the fees then it lost its income & the performance of the bank looks very weak which leads to downfall in market share.

On the other hand, if bank does overcharge of such things then the false performance of bank is shown and customer may be misguided due to this.

It is the prima facial duty of auditor to shoe the true and fair performance of the clients.